Comments on: Time Value of Money: How to Calculate the Effective Annual Rate (EAR)

By: AnTakTau

AnTakTau — Sat, 05 May 2012 07:07:54 +0000

the formula partially correct.

you should include inflation rate. last figure that i known, it stand at 3.0++%.

all in all, your fixed deposit only growing by numbers, not the real value.

By: chea F. Kennedy

chea F. Kennedy — Wed, 20 Oct 2010 13:25:24 +0000

Calculating EAR You are looking at an investment that has an effective annual
rate of 16 percent. What is the effective semiannual return? The effective quarterly
return? The effective monthly return?

By: Carol

Carol — Tue, 19 Jan 2010 04:51:18 +0000

Hi KC Lau, in your example above, what is the ear per annum for the five-year period and how is it calculated? TIA!

By: meg

meg — Thu, 10 Dec 2009 06:10:28 +0000

3.2% compounded monthly = 3.247% p.a. (using the above formula)
3.0% compounded monthly = 3.0416% p.a.

1st year: 7000*3.247% = 7227.315 (rounding error)
2nd year: 7227.315*3.247% = 7462.011
3rd year: 7462.011*3.0416% = 7688.975
4th year: 7688.975*3.0416% = 7922.843
5th year: 7922.843*3.0416% = 8163.824

By: Case Study: Consolidating Personal Loan, Mortgage and Credit Card Debt

Case Study: Consolidating Personal Loan, Mortgage and Credit Card Debt — Tue, 20 Oct 2009 06:09:45 +0000

[...] Sorry that I don’t want to confuse you with this jargon. In layman terms, just compare the effective annual rate (EAR) of return on where you put the money now. Since the personal loan interest is 5.75%, it is better [...]

By: kelvin

kelvin — Sat, 18 Apr 2009 14:45:58 +0000

Mr KC Lau,
can you show me how to calculate ROI And EAR.
If I purcahse a saving plan for 20 yrs cost me Rm 20,000 and my returned at them is only Rm18,000. what is my ROI and EAR.
what happen if i don’t surrender and 10 yrs later i withdraw and the amount are Rm40,000
what is my ROI and EAR?
please ahow me in detail how to calculate for the above 2 scnerio.
i am very weak in math and hopefully you can show me more in detail.
tks.

By: KCLau

KCLau — Sat, 02 Feb 2008 03:23:02 +0000

@mllclim,

the last three years should be compounded monthly too, just like what you’ve done for the first 2 years.

By: mllclim

mllclim — Thu, 31 Jan 2008 03:34:00 +0000

$7,000.00 3.2% 01.01.07 $18.6667
$7,018.67 3.2% 01.02.07 $18.7164
$7,037.38 3.2% 01.03.07 $18.7664
$7,056.15 3.2% 01.04.07 $18.8164
$7,074.97 3.2% 01.05.07 $18.8666
$7,093.83 3.2% 01.06.07 $18.9169
$7,112.75 3.2% 01.07.07 $18.9673
$7,131.72 3.2% 01.08.07 $19.0179
$7,150.73 3.2% 01.09.07 $19.0686
$7,169.80 3.2% 01.10.07 $19.1195
$7,188.92 3.2% 01.11.07 $19.1705
$7,208.09 3.2% 01.12.07 $19.2216
$7,227.31 3.2% 01.01.08 $19.2728
$7,246.59 3.2% 01.02.08 $19.3242
$7,265.91 3.2% 01.03.08 $19.3758
$7,285.29 3.2% 01.04.08 $19.4274
$7,304.71 3.2% 01.05.08 $19.4792
$7,324.19 3.2% 01.06.08 $19.5312
$7,343.73 3.2% 01.07.08 $19.5833
$7,363.31 3.2% 01.08.08 $19.6355
$7,382.94 3.2% 01.09.08 $19.6879
$7,402.63 3.2% 01.10.08 $19.7404
$7,422.37 3.2% 01.11.08 $19.7930
$7,442.17 3.2% 01.12.08 $19.8458

$7,462.01 3.0% Yr 2009 $223.8603
$7,685.87 3.0% Yr 2010 $230.5761
$7,916.45 3.0% Yr 2011 $237.4934

$8,153.94 Total

i didnt get the answer right. May i know where did i go wrong? Thank you.

By: KCLau

KCLau — Thu, 17 Jan 2008 03:30:13 +0000

Hi Nik Siong,

You’ve got the right answer!

Congratulations!

By: nik siong

nik siong — Wed, 02 Jan 2008 14:55:22 +0000

the answer is RM 8163.82.